Prudent grain management

One of the biggest challenges confronting the government is unabated food inflation. The irony of this situation becomes stark when the government asserts that foodgrains and oilseeds production this year has reached new highs. Wheat harvest has commenced in the major producing States and arrivals will gather momentum in the coming weeks. Given the crop size of 84 million tonnes, as estimated by the Agriculture Ministry, the country is likely to have so much wheat that storage space is bound to get scarce. This is on top of an already unmanageable inventory situation with the existing public stocks of rice and wheat estimated at 45 million tonnes — more than twice the norm for this time of the year — occupying most of the warehousing space and part of the inventory exposed to the elements in the form of simple cover and plinth storage. How and where will the Food Corporation of India and associated State agencies procure and store wheat this season is anybody's guess.

While the challenge is daunting, there is no sign of policy-makers being even remotely bothered about excessive stocks of fine cereals rotting in public warehouses. Worse, the existing stocks have become more expensive and unaffordable. The carrying cost is an estimated Rs 2,400 per tonne per year which makes the 2010 wheat crop today Rs 13,400 a tonne. The cost of carrying excessive grain stocks represents more than a third of the food subsidy Bill. It is time this kind of profligate grain management is stopped. Instead of open-ended procurement, we need a flexible procurement policy that works on basis of a pre-determined annual ceiling on procurement, after taking into account existing stocks, crop size and requirement until the next harvest. As for the existing buffer stocks, the sooner we liquidate the excess the better. There are only two ways of doing this. Quickly, sell a part of the excess stocks in the open market in a manner that the grains get well dispersed across the country in small lots through a large number of small traders. This will prevent large traders from cornering them. Sale of old stocks at the current market rate will inevitably involve an element of subsidy, which should be absorbed by the government. At the same time, a part of the inventory can be exported which, at the current international prices, may not necessitate any subsidy.

Expeditious liquidation of about five million tonnes of grains through a combination of domestic sale and export will ease the storage situation. At the same time, a ceiling can be fixed on the current season's wheat procurement. Bringing about progressive change in the grains procurement and management policy requires conviction and political will.

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